>LOGISTICS SECTOR ( RELIGARE)

The decline in aggregate container volumes moderated to 1.8% YoY in October ’09, as compared to drops of 8.1% and 4.3% posted in Q1FY10 and Q2FY10 respectively. With the exception of JNPT and Kolkata, all major ports posted a healthy performance, in line with the improving economic climate. Commodity-wise, fertilisers and coal remained sluggish with a decline in traffic of 29% and 3.1% respectively, while iron ore and other cargo rebounded with growth rates of 66% and 38% YoY respectively.

■ Slowdown in container traffic moderates: Aggregate container volumes (in teu) dipped 1.8% YoY during the month of October, a significant improvement over the drops of 8.1% and 4.3% YoY registered in Q1 and Q2FY10 respectively. Over April – October ’09, container volumes dropped 5.7% YoY across major ports. In tonnage terms, volumes grew marginally by 1.4% YoY in October, as against the slippages of ~5% and 2.7% seen in the first two quarters respectively.

Modest decline in volumes

■ JNPT records steep slippage: All the major ports, barring JNPT and Kolkata, clocked healthy growth in container volumes over April – October. For the month of October, JNPT recorded a steep drop of 11.2% YoY as against 8% in Q1FY10 and 4.8% in Q2FY10. Chennai, the second largest container port, resumed its positive trajectory with 2.1% YoY growth in October, from dips of
11.5% and 1.7% in the first and second quarters respectively.

■ Aggregate cargo volumes improve: Despite lower container traffic for the month, an increase in iron ore and other cargo (up 66% and 38% YoY respectively) led to an 11.1% growth in aggregate cargo for the month of October – a marked improvement over the 1.9% and 2.9% YoY growth rates posted in Q1 and Q2 respectively. The fertiliser segment remained subdued and dropped 29% YoY during the month. With a relative improvement in macro conditions, aggregate cargo volumes increased 3.6% YoY during April – October ’09. Iron ore and other cargo recorded growth rates of 11.6% and ~15% YoY respectively over this period, while fertiliser cargo dropped 18% YoY. In tonnage terms, container volumes remained flattish.

■ Medium-term positive for container logistics players: The gradual improvement in container traffic is positive for CFS (container freight station) and rail haulage players in the medium term. But any subsequent slowdown in the global economy may dampen the recovery. We maintain our positive bias on logistics players and continue with our Hold rating on Concor and Buy rating on Gateway Distriparks (GDL).

To read the full report: LOGISTICS SECTOR